Two weeks ago we identified a few different marketing channels for trades to promote their business and services. This short blog post delves into how we can identify which of those marketing channels are the most profitable for your business.
How do we define profitable marketing channels?
There are lots of ways we can define a profitable marketing channel. In its simplest form, a profitable marketing channel is a channel that brings in profit for your business. Important: Profit and NOT revenue.
Revenue: Every pound that comes into the business
Profit: Revenue minus ALL business costs, where costs might include public liability insurance, accreditations/memberships (Gas Safe Register) van insurance/tax/MOT, work materials, wages and advertisements (SEO, magazine publications etc.)
Defining the most profitable marketing channel is a little bit more complicated, however. Instead, you need to think long-term:
- After the initial work, how much referral work do you tend to get from customers on that marketing channel?
- Is there a larger opportunity to up-sell on that marketing channel?
- What’s the lifetime value of customers on that marketing channel, i.e. is there lots of repeat work or does it tend to be one-off work?
- How much time does it take to win work on that marketing channel and is it practical/sustainable? Remember, time is money too.
It might take a couple of years of experience in the trade to answer some of these questions, but once you’ve answered them, you can start making smart business decisions.
Profitable marketing channels in action:
Job: £1500 Boiler installation
Daily business running costs: £500
Marketing channel one: Magazine advertisement: £50 for one advertisement that sits in a magazine all month – Win 10 leads – Invoice 2 customers – win 1 job.
Customer acquisition costs (ignoring daily business running costs) £5 per lead, £25 per invoice and £50 per job.
Total profit for 1 job: £950
Marketing channel two: Website SEO: £100 for one month – Win 5 leads – Invoice 2 customers – Win 1 job.
Customer acquisition costs (ignoring daily business running costs): £20 per lead, £50 per invoice and £100 per job.
Total profit for 1 job: £900
From this perspective, it’s an obvious choice to choose the magazine advertisement as the preferred and most profitable marketing channel because of the extra £50 profit.
However, now take into account that the customer acquired from the magazine advertisement referred only 1 customer for the same job, equalling another £1000 profit (ignoring customer acquisition costs), whereas the website customer referred 2 customers, equalling another £2000 profit (ignoring customer acquisition costs). Additionally, the website customer has opted in for an annual boiler service, equalling an additional £80 profit for the next year, minimum.
Now, from this perspective, it’s more of an obvious choice to choose website SEO as the preferred marketing channel because of the additional £1080 profit that if offers over the magazine (1 extra boiler install and first year boiler service).
Deciding on marketing channels
Referring back to an earlier point on making smart business decisions: Is it now better to drop the magazine as a marketing channel where you’re getting lots of immediate, short-term work but little repeat/referral work and instead focus on website SEO where there’s smaller immediate, short-term profit, but where there’s more repeat/referral work? Over time and with more experience, you’ll be able to answer these questions more accurately.
For business running costs that are paid annually, you can work out their daily costing by dividing the total cost by the number of days you’ve worked (roughly around 250 for those that work 5 days a week).
Join Expert Trades
Head over to our private Facebook group and join the discussion. Also, for a more in-depth review of identifying profitable marketing channels and for other useful tips on how to be a business owner first and a trades professional second, head over to Trade Talk and hit subscribe for weekly updates.
The post Identifying Profitable Marketing Channels For Trades appeared first on Expert Trades.